(The Canadian Press)

(The Canadian Press)

Bank of Canada holds interest rate as it takes stock of trade war impacts

The move kept the central bank’s overnight rate at 1.75 per cent

The Bank of Canada is holding steady on interest rates as it gauges the extent of the damage that deepening trade conflicts have had on the domestic and global economies.

The rate decision Wednesday, which was widely expected, kept the central bank’s overnight rate at 1.75 per cent and followed a solid second-quarter rebound for the Canadian economy.

But the bank’s accompanying policy statement said some of the strength seen earlier this year will likely be temporary and it predicted economic activity to slow in the second half of 2019. It also underlined the weak spots — such as a sharp contraction in Canadian business investment that coincided with the increased trade tensions.

The intensification of the U.S.-China trade war has been a bigger drag on global economic momentum than the bank had predicted at its July 10 meeting, the statement said.

“Canada’s economy is operating close to potential and inflation is on target,” the bank said in the statement, its first public comments since the July rate announcement and monetary policy report.

“However, escalating trade conflicts and related uncertainty are taking their toll on the global and Canadian economies.”

The current level of policy stimulus remains appropriate and the bank will continue to monitor the evolving international conditions ahead of its Oct. 30 meeting, the statement said.

“As the bank works to update its projection in light of incoming data, governing council will pay particular attention to global developments and their impact on the outlook for Canadian growth and inflation,” said the bank, referring to next month’s rate decision and monetary policy report.

The bank said the unexpected strength in the second quarter was fuelled by rebounds in energy production and exports. Housing activity also bounced back faster than anticipated although the bank warned it could pile more debt onto already stretched households.

The statement noted that while wages have increased, consumer spending was unexpectedly weak in the second quarter.

Heading into the announcement, governor Stephen Poloz was widely expected to leave the rate unchanged, even as other central banks have begun to make or signal cuts.

Many analysts have predicted the bank will lower rates at its next rate announcement on Oct. 30, mostly due to expanding trade risks and the deteriorating global economy.

On Thursday, Bank of Canada deputy governor Lawrence Schembri will provide more detail about the governing council’s thinking when he gives a speech and holds a news conference in Halifax.

The bank’s decision Wednesday kept the rate at 1.75 per cent for seventh-consecutive policy meeting. The Canadian economy experienced an abrupt deceleration over the winter that nearly brought growth to a halt.

Last week, a report from Statistics Canada said the economy expanded at an annualized pace of 3.7 per cent in the second quarter, which was higher than the Bank of Canada’s projection of 2.3 per cent.

READ MORE: Inflation hits Bank of Canada 2% target for second straight month

Andy Blatchford, The Canadian Press


Like us on Facebook and follow us on Twitter.

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

A health-care worker prepares a dose of the Pfizer-BioNTech COVID-19 vaccine at a UHN COVID-19 vaccine clinic January 7, 2021. THE CANADIAN PRESS/Nathan Denette
Employers might be able to require COVID-19 vaccination from employees: B.C. lawyer

‘An employer must make the case’ using expert science, explains lawyer David Mardiros

Heavy flows of water pooled on Davis Road after a lead to a fire hydrant burst on Thursday Jan. 21. (Jim Tredwell photo)
Fire hydrant connection burst at Davis Road and Battie Drive

Crews worked well into the night on Thursday Jan. 21 to staunch the flow of water

A pedestrian was transported to hospital after being struck while crossing Roberts Street. (Cole Schisler photo)
Pedestrian struck crossing Roberts Street

The driver remained on scene and is cooperating with police

Emergency crews were called to a semi-truck crash along the Trans-Canada Highway at Oyster Sto’Lo Road on Friday, Jan. 22. (Cole Schisler/Black Press)
Semi truck crashes off the side of the highway in Ladysmith

Driver taken to hospital as precaution after single-vehicle crash Friday

Dog owners, from left, Marlyn Briggs with Nayla, Marjory Sutherland with Effie and Mick, and Christina Godbolt with Conon walk their pets frequently at the Chemainus Ball Park but are growing increasingly concerned about drugs being found discarded in the area. (Photo by Don Bodger)
Puppy rushed to emergency 3 times after ingesting drugs in Vancouver Island public spaces

Dog owners walking in Chemainus parks urged to take caution

U.S. Senator Bernie Sanders sits in on a COVID-19 briefing with Dr. Bonnie Henry, provincial health officer, and Adrian Dix, B.C. minister of health. (Birinder Narang/Twitter)
PHOTOS: Bernie Sanders visits B.C. landmarks through the magic of photo editing

Residents jump on viral trend of photoshopping U.S. senator into images

A woman injects herself with crack cocaine at a supervised consumption site Friday, Jan. 22, 2021 in Ottawa. THE CANADIAN PRESS/Adrian Wyld
Drug users at greater risk of dying as services scale back in second wave of COVID-19

It pins the blame largely on a lack of supports, a corrupted drug supply

Wet’suwet’en supporters and Coastal GasLink opponents continue to protest outside the B.C. Legislature in Victoria, B.C., on Thursday, February 27, 2020. THE CANADIAN PRESS/Chad Hipolito
‘We’re still in it’: Wet’suwet’en push forward on rights recognition

The 670-km Coastal GasLink pipeline was approved by B.C. and 20 elected First Nations councils on its path

The sky above Mt. Benson in Nanaimo is illuminated by flares as search and rescuers help an injured hiker down the mountain to a waiting ambulance. (Photo courtesy Nanaimo Search and Rescue)
Search plane lights up Nanaimo mountain with flares during icy rope rescue

Rescuers got injured hiker down Mt. Benson to a waiting ambulance Saturday night

Jennifer Cochrane, a Public Health Nurse with Prairie Mountain Health in Virden, administers the COVID-19 vaccine to Robert Farquhar with Westman Regional Laboratory, during the first day of immunizations at the Brandon COVID-19 vaccination supersite in Brandon, Man., on Monday, January 18, 2021. THE CANADIAN PRESS/Tim Smith - POOL
Top doctor urges Canadians to keep up with COVID measures, even as vaccines roll out

More than 776,606 vaccines have been administered so far

From the left: Midway RCMP Csts. Jonathan Stermscheg and Chris Hansen, Public Servant Leanne Mclaren and Cpl. Phil Peters. Pictured in the front are Mclaren’s dog, Lincoln and Peters’ dog, Angel. Photo courtesy of BC RCMP
B.C. Mounties commended for bringing firewood to elderly woman

Cpl. Phil Peters said he and detachment members acted after the woman’s husband went to hospital

Dr. Jerome Leis and Dr. Lynfa Stroud are pictured at Sunnybrook Hospital in Toronto on Thursday, January 21, 2021.THE CANADIAN PRESS/Frank Gunn
‘It wasn’t called COVID at the time:’ One year since Canada’s first COVID-19 case

The 56-year-old man was admitted to Toronto’s Sunnybrook Health Sciences Centre

An Uber driver’s vehicle is seen after the company launched service, in Vancouver, Friday, Jan. 24, 2020. Several taxi companies have lost a court bid to run Uber and Lyft off the road in British Columbia. THE CANADIAN PRESS/Darryl Dyck
Taxi companies lose court bid to quash Uber, Lyft approvals in British Columbia

Uber said in a statement that the ruling of the justice is clear and speaks for itself

Nanaimo Regional General Hospital. (News Bulletin file photo)
COVID-19 outbreak declared at Nanaimo hospital

Two staff members and one patient have tested positive, all on the same floor

Most Read